Consumer Advocates Criticize Allstate’s Claims Practices

A California consumer advocate group is condemning Allstate for allegedly “systematically underpaying claims to policyholders, or forcing them into protracted court battles to secure a fair settlement.”

According to Consumer Watchdog, formerly the Foundation for Taxpayer and Consumer Rights, the shoddy business practices were exposed when the insurer released 150,000 pages of documents on its Web site of consultant McKinsey & Co.’s report on claims practices conducted in the 1990s.

“Thousands of pages of Allstate’s internal documents reveal the company’s ‘Us versus Them’ attitude toward its customers. Allstate policyholders who paid their premiums faithfully were fleeced while the company underpaid claims and padded profits with the money they owed their customers,” CW stated. “These revelations demand that state regulators open examinations of Allstate rates, and require the insurer to refund consumers for overcharges and lower insurance premiums where they have been too high across the country,” said Carmen Balber for the advocate group. “Allstate’s ‘good hands’ are stealing from customers’ pocketbooks,” she said.

However, Allstate said the documents, as analyzed by CW and others, were taken out of context. “Public criticisms by people with a vested interest in creating an inaccurate picture of the company’s claim practices have been based unfairly on only snippets from the documents taken out of context,” the company said in a statement.

Some of the facts about Allstate’s claims practices that the company said have been overlooked in the debate over the documents include:

– As a regulated company, Allstate’s claims practices are available to and regularly reviewed by state departments of insurance.

-Allstate resolved millions of homeowners and auto claims last year and continued to earn very high rates of policy renewal.

-The company regularly communicates with our customers and claimants about their claim and what they can expect from the process.

-Allstate is aggressive in fighting fraud to protect our customers and reduce the cost of insurance. The company employs a special investigative unit (SIU) that is specifically charged with identifying and combating fraud.

“We became the largest publicly held personal lines insurance company in the United States in no small part because we built a reputation of being there for our customers in their time of need by resolving claims fairly, accurately and in a timely manner,” said Allstate spokesman Rich Halberg. “The fact that we have added millions of new customers over the past 15 years speaks to the outstanding claim service we provide.”

The company noted that the documents were designed to help it more consistently and effectively evaluate claims. Furthermore, “When aired in the unbiased setting of a court of law, allegations about the documents have been shown to be without merit. Most recently, some of the documents were seen and explained in context to a jury during a two-week trial in Kentucky (Hager v. Allstate). The jury unanimously ruled in Allstate’s favor in deliberations that lasted less than two hours,” the company said.

Nevertheless, Consumer Watchdog Executive Director Doug Heller said, “Lawmakers and regulators around the country need to crack down on insurance company gouging and abuses to protect consumers, not just from Allstate, but from rate and claims abuse throughout the insurance industry.”

To view the documents, visit media.allstate.com.

Sources: Allstate, Consumer Watchdog